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Aussies will spend more after omicron ‘blip’, Mastercard says

Patrick Durkin
Patrick DurkinBOSS Deputy editor

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The Australian Open is showing people that there is “life after COVID-19” despite a plunge in spending and confidence caused by the omicron wave, the Australian head of Mastercard says.

Richard Wormald said the grand slam tournament in Melbourne was critical to rebuilding consumer confidence.

Alex de Minaur in front of a Mastercard sign at the Australian Open. Eddie Jim

“It’s a very positive sign for all of us on living with COVID-19 rather than hiding away from it,” he said. “Hopefully, it does give people confidence to get out and realise there is life after COVID-19 and we can run big events still.”

Mastercard is a major sponsor of the Australian Open, and a meme featuring the words “Mastercard accepted across the world when your VISA isn’t” next to an image of Novak Djokovic has gone viral.

Crowds have been capped at 50 per cent after the Victorian government made a last-minute change to ticketing.

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Almost 43,000 fans attended on Saturday, the latest figures available, to take the tally for the first six days to 184,361.

Mastercard data for December shows retail sales increased 4.6 per cent compared with the corresponding period of the previous year, and are up 10.4 per cent on 2019. The “household goods” category was the top performer in retail, up by 11 per cent, and clothing was up 7.7 per cent.

But department store sales were lower by 3.2 per cent, reflecting the reduced foot traffic in CBDs.

The December data reflects the period before omicron took hold in Australia.

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“The new year has delivered new challenges for retailers in the form of omicron with tens of thousands of people being forced into isolation every day,” Australian Retailers Association CEO Paul Zahra said.

“And that’s taking a huge toll on the industry, and small businesses in particular, where just a few absences can wipe out an entire store’s workforce.”

Mr Wormald expected a return to strong spending because Mastercard data revealed that the switch to online shopping and eating was permanent.

“Omicron is a bit of a blip at this point of time, clearly some people have pulled back, but our view is that will pass,” he said. ”If you are a physical retailer only, the world will look a lot worse.

Richard Wormald, Mastercard’s division president, Australia. 

“We’re probably seeing at least a 50 per cent lift in aggregate e-commerce spend pre- and post-COVID-19,” he said. “There’s been a permanent shift in consumer behaviour with regard to purchasing online and we have seen three to five years growth in e-commerce spending in one year.

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“Take groceries, for example. We saw in lockdowns spending on food delivery services absolutely skyrocket. Now we’re out of lockdown and that spend hasn’t necessarily fallen away. At least 20 per cent of that spend lift in our view is permanent.”

Mr Wormald said the shift would affect business for the next decade with capital injection required across payments systems, warehousing and delivery.

Although conditions on the ground were tough – particularly with swathes of staff shortages because of COVID-19 infections and the isolation rules – the underlying conditions remained strong, he said.

“You have people going on holiday in January, so you always see a seasonal dip in January. The end of January you have the back to school sales and then you get into a more normal cadence,” Mr Wormald said.

“We think consumer confidence is still strong and while there’s obviously been some recent pullback in activity, our view is that is transient and we will see consumers back out spending in physical stores over the course of 2022.”

Mastercard’s data also shows that Australians are much more likely to take a domestic pleasure trip in the next six months (53 per cent) than they were at the end of 2022 but cross-border travel plans have remained static (15 per cent). The top destinations for travel are New Zealand (18 per cent), United States (13 per cent), Japan (12 per cent) and Canada (11 per cent).

Mastercard has put a major focus on sustainability around this year’s Australian Open sponsorship – offsetting the carbon impact of all its activities – amid its new data, which finds that 58 per cent of leaders are prioritising greener practices over the next 12 months and 48 per cent of consumers saying they would shop around to source products sustainably.

Patrick Durkin is Melbourne bureau chief and BOSS deputy editor. He writes on news, business and leadership. Connect with Patrick on Twitter. Email Patrick at pdurkin@afr.com

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